Higher growth, less employment and consumption

The economic panorama of Mexico is contrasting.

Contrary to most forecasts, the Gross Domestic Product (GDP) would have registered a rate of around 3% at the end of 2022.

The data is undoubtedly good. It is always good when the economy grows at a higher rate.

On the other hand, the strong peso has registered a streak of appreciation that has reached so that President Andrés Manuel López Obrador and officials of his government presume it as if it were something that occurs by virtue of some specific government action and was not the product of the operation of the free floating exchange market.

It must be said that the appreciation of the peso against the dollar is circumstantial and can be explained by the weakness of the US currency.

Paradoxically, while a higher rate of economic growth is registered, at the same time higher unemployment, greater informality and lower consumption are observed.

Despite the fact that Mexico’s economic growth closes 2022 with a rate close to 3%, such dynamism is not reflected in employment.

INEGI data reveals that the unemployment rate in the country closed the year 2022, at its lowest level in 17 years!

And they show a worrying size in labor informality.

Of the 57.95 million employed people, more than 31 million are working in the informal sector.

In the last month of 2022, despite the approval and entry into force of the outsourcing reform – which tries to curb the seasonal layoff of staff at the end of the year – 912,000 jobs were lost.

The figure represents 1.55 percent of the employed population, the largest percentage drop for a similar month since 2015, warns Gabriela Siller, chief economist at Banco Base.

In that same month, the unemployment rate registered a new all-time low of 2.76 percent.

The number of layoffs can be explained by the end of the sales season, both at Buen Fin –which had a weak performance– and at the end of the year.

The high levels of inflation negatively impacted the sales expected for the Good End.

According to unofficial calculations, sales would have been 30% lower than projected.

The spillover for the Good End, the 2022 FIFA World Cup and the December holidays were insufficient for private consumption to grow at a monthly rate in the last two months of 2022.

In its annual comparison, it marked a deceleration trend.

But returning to the subject of employment, the data on layoffs reflect the highest figure compared to previous years.

As for consumption, in 2022 it closed down.

According to the new Timely Indicator of Private Consumption or IOCP of the National Institute of Statistics and Geography -which allows knowing the performance of the national domestic market just two weeks after the end of the month of reference- private consumption in Mexico fell 0.4% in December compared to the previous month, which means its second consecutive decrease in the seasonally adjusted series.

I wish that the greater economic growth at the end of 2022 would have been reflected in a higher rate of employment growth, a decrease in informality and an increase in consumption. But it was not like that.

In addition, the data on economic behavior at the end of the year show a deceleration trend for this year 2023.

2023 began with a marked accent of economic uncertainty.

A part of the concerns stem from the probable scenario of recession in the US.

However, in recent days, data has been released that encourages optimism. There are those who think that the US recession is likely to be shallow and not deep.

If confirmed, it would be very beneficial for Mexico.

But the most important thing is that the engines of growth start in Mexico. In particular, increase public and private investment. And for this, legal certainty and investment certainty are required.

We will see.

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